Correlation Between Fidelity Sustainable and Fortune Brands
Can any of the company-specific risk be diversified away by investing in both Fidelity Sustainable and Fortune Brands at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fidelity Sustainable and Fortune Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fidelity Sustainable USD and Fortune Brands Home, you can compare the effects of market volatilities on Fidelity Sustainable and Fortune Brands and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fidelity Sustainable with a short position of Fortune Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Sustainable and Fortune Brands.
Diversification Opportunities for Fidelity Sustainable and Fortune Brands
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Fidelity and Fortune is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Sustainable USD and Fortune Brands Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortune Brands Home and Fidelity Sustainable is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fidelity Sustainable USD are associated (or correlated) with Fortune Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortune Brands Home has no effect on the direction of Fidelity Sustainable i.e., Fidelity Sustainable and Fortune Brands go up and down completely randomly.
Pair Corralation between Fidelity Sustainable and Fortune Brands
Assuming the 90 days trading horizon Fidelity Sustainable is expected to generate 1.65 times less return on investment than Fortune Brands. But when comparing it to its historical volatility, Fidelity Sustainable USD is 5.18 times less risky than Fortune Brands. It trades about 0.17 of its potential returns per unit of risk. Fortune Brands Home is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 7,653 in Fortune Brands Home on September 13, 2024 and sell it today you would earn a total of 125.00 from holding Fortune Brands Home or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
Fidelity Sustainable USD vs. Fortune Brands Home
Performance |
| Timeline |
| Fidelity Sustainable USD |
| Fortune Brands Home |
Fidelity Sustainable and Fortune Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fidelity Sustainable and Fortune Brands
The main advantage of trading using opposite Fidelity Sustainable and Fortune Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Sustainable position performs unexpectedly, Fortune Brands can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fortune Brands will offset losses from the drop in Fortune Brands' long position.The idea behind Fidelity Sustainable USD and Fortune Brands Home pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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